A toolkit to bust corruption

Given the series of grisly Hollywood-style frauds in recent years — the pilfering at EOH, the R2bn grand larceny at VBS Mutual Bank and the R106bn con at Steinhoff, for starters — you’d have to wonder why there’s been no crib-sheet to help companies thwart corruption.

It’s a question that seized Gideon Pogrund’s centre for business ethics at the Gordon Institute of Business Science (Gibs), and led to the launch of the country’s first “anti-corruption working guide” this week, in partnership with Business Leadership South Africa (BLSA).

“This is another crucial piece of the puzzle in our fight against corruption,” writes BLSA CEO Busi Mavuso in the guide.  “It bolsters the corporate governance framework and gives companies a comprehensive, workable plan to tackle corruption.”

Pogrund’s centre began working on the project last year, convening a series of round-table discussions attended by those who’d been affected by the scandals and by  state capture. Among them were former JSE CEO Nicky Newton-King, KPMG chair Wiseman Nkuhlu, Steinhoff CEO Louis du Preez, SAA executive chair John Lamola and Zondo commission secretary Prof Itumeleng Mosala.

Also participating was Prof Phil Nichols, an expert in anti-corruption strategies at the University of Pennsylvania’s Wharton business school, who said that while South Africa is at a crossroads, “the world is littered with success stories of places that were worse — a lot worse — and are now clean”. 

This new “working guide” proposes 38 principles, drawing from both the ISO 37001 global standard dealing with corruption, proposals from those who attended the Gibs sessions, and other relevant research. 

The business case couldn’t be clearer, according to research in 2017 by a team at Norway’s Chr Michelsen Institute. “Companies with anti-corruption programmes and strong ethical guidelines are found to suffer up to 50% fewer incidents of corruption than those without such programmes, indicating integrity programmes are an effective means of minimising losses,” it said.

It illustrates how far we have to go, and how we must significantly increase the scale of collective action if we are to reverse the scale of corruption that we’ve witnessed

—  Gideon Pogrund

Equally, Harvard University’s Prof Raymond Fisman and Stockholm University’s Prof Jakob Svensson found that a 1% increase in the bribery rate results in a 3%-plus drop in a company’s growth. 

That might seem intuitive, but it’s an important counter to those South African executives who still believe the benefits of bending the rules outweigh the potential cost of being caught, especially given a less-than-adept crime-fighting apparatus.

The 38 principles in the guide include how to set the tone at the top; how to structure a company “anti-corruption policy”; installing an anti-corruption compliance function; dealing with tricky issues such as lobbying, donations and consulting contracts; the role of whistleblowers; and reparations in the case of corruption.

For instance, Wendy Dobson, senior MD at FTI Consulting and a former Standard Bank executive, lists 10 steps companies ought to take to ensure “responsible lobbying”, since many meet government officials with the goal of influencing policy and legislation.

As things stand, companies don’t have to detail all donations made to think-tanks, governments, political parties or politicians in their annual reports; Dobson says this must change. 

Mavuso, however, says these proposals will “work only if we act collectively in making [them] a reality across the business landscape”.

It’s a point that Pogrund stresses, citing the examples of Werksmans’ partnership with the Hawks, and BLSA’s work with the National Prosecuting Authority to build skills in crime-fighting institutions. 

“These examples suggest what is possible. But it also illustrates how far we have to go, and how we must significantly increase the scale of collective action if we are to reverse the scale of corruption that we’ve witnessed,” he writes.

The mechanics of this “collective action” remain unclear, however. 

The guide suggests that “South African firms could agree to a formal corruption compliance pact, with the consequence of a breach being exclusion from that group”.

This would carry strong coercive power, with implications for whether a company is seen as having a “social licence” to operate. As EOH CEO Stephen van Coller puts it, the principle should be: “If you’re corrupt, you’re an outcast.”

Since the problems at companies often stem from a rotten culture — think Glencore’s insidious practice of kickbacks, or Tiger Brands’ repeated collusion a decade ago — a large part of the guide addresses that.

Mollie Painter, a professor of ethics and organisation at Nottingham Trent University’s business school, sketches out techniques to minimise the “bad apples”.

“These include rigorous vetting of CVs, ensuring you have a values-driven recruitment process, making use of psychometric instruments to test integrity, and supporting the practice of speaking out in various ways across the organisation,” she says. 

Painter also outlines techniques for monitoring whether the entire apple barrel is at risk of rotting — including frequently taking the temperature of the organisation and “implementing stringent policies, especially in the areas of gifts and gratuities, conflicts of interest, consultancy practices and procurement”.

Morris Mthombeni, the dean of Gibs, argues that the guide is a vital call to action. 

“It is hard to build and run a business under normal competitive conditions, both locally and internationally — but it is nearly impossible to do so, at least in a sustainable manner, in a corrupt operating environment,” he says.

* Note: The author participated in writing the Gibs report

Read the new Gibs/BLSA anti-corruption working guide for SA companies below.